A Fine Balance

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Andrew Fastow, the disgraced CFO of Enron, possessed a masters in business administration degree. It was a prestigious one, to boot, from Kellogg Business School at Northwestern University in the US. He never became an accountant. Sherron Watkins, the woman who blew the whistle on the Enron scandal and a certified public accountant, never earned an MBA. Ergo, Fastow was more easily corrupted than Watkins.

Avid readers of Scott Turow, the US bard of corporate malfeasance, might see this as a feasible proposition, but hang on a minute. If there were no crooked accountants, then Arthur Andersen, Enron’s once tarnished, now-vanished auditor, would still be sending armies of green eyeshades to pore over company P&Ls. And not every finance exec armed with an MBA drove a dagger into their company. The swing-back toward accounting and away from MBAs could be a long-term trend — or conventional wisdom that stands to change yet again.

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For aspiring financial executives and current CFOs looking to pull themselves onto the next rung, hard choices have to made about how to top off their education. The question of whether to spring for that MBA necessarily presents a risk/reward scenario. Earning an MBA means spending precious time and money to win those three letters that once carried such a cachet, and may yet again. But the opportunity cost could be heavy in the current environment of Asian growth. The consequence of taking time away from a growing job may mean a missed chance for advancement. So is an MBA necessary, or not?

The Pendulum Effect

Like so many trends affecting their jobs, CFOs in Asia must grapple with residual effects from upsets in the far-off US market. Financial execs armed with MBAs only and trained as investment bankers became the rage at many large US companies in the 1990s, while accounting and controller functions were delegated to CPA subordinates. The gloss came off this approach after Enron’s fall, and the economic downturn put it distinctly out of fashion. The US Sarbanes-Oxley Act added pressures — and accountability — to companies’ senior executives, specifically the finance team. The M&A market went fallow. Now, with growth returning worldwide, the pendulum is easing back to the middle. Companies are calling for skills that include a mix of accounting, finance, and strategy.

Reflecting the state of flux, the region’s CFOs stand divided in opinion. Some are full-fledged supporters of wonky B-school degrees. “The best CFOs are well rounded,” says Mark Keithley, CFO at IP/Internet network solutions provider NetStar in Hong Kong. “They’re not just CPA-accountants. They’re not just treasurer-MBA-bankers. You’d like to have it all.” Keithley, who is a CPA, a certified internal auditor, and holds an MBA, adds: “A bookkeeper or accountant is a controller, able to close the books and meet deadlines and targets, but he does not necessarily understand what the numbers mean. You don’t want just a numbers cruncher.”

Others argue that an accountancy degree is enough qualification, if the finance professional adds to his experience with varied responsibilities in operations. “I got into banking, treasury, and financial transactions when I was doing my chartered accountancy training in London,” says Ravi Ramu, CFO at Mphasis, the Bangalore IT company. Ramu studied accounting in the UK and is a member of the Institute of Chartered Accountants in England and Wales. “I used to audit banks. You get to understand what happened in the transaction, things like risk management. I also learned what needed to go into the books.” Ramu speculates that one reason MBAs became CFO material in the US is because CPAs there are not required to undergo articleship before sitting for board exams — a requirement under the UK system.

Kris Chellam, CFO of California semiconductor company Xilinx, plumps for hard-earned experience, and choosing the right proving ground for it. “One learns more from experience and peers than any MBA program,” he says. The Malaysian-born chartered accountant was controller at Intel and CFO at Atmel before becoming senior vice-president for finance of Xilinx in 1998. The key is to sign up with high-profile companies with a reputation for good management and probity. “Intel provided me a great foundation for both skills development and management training,” says Chellam. “Most of all, the finance role required utmost integrity and professionalism. Any breach would have led to termination.”

And some academics caution that the merits of ethics training under a CPA degree are overrated. “There is no doubt that there is a code of ethics that public accountants abide by,” says David Wilson, president and CEO of Washington-based Graduate Management Admission Council, the body that administers the GMAT test that is a requirement for admission in more than 1,700 business schools around the world. He adds: “But taking a course in ethics doesn’t make you ethical, anymore than staying in the garage makes you an automobile.”

Balancing Act

Rakesh Nagpal doesn’t doubt his own integrity — and he still wants that MBA. It was two weeks before his 40th birthday when he spoke to CFO Asia. Naturally, the Singapore-based finance director of Avnet, an electronics firm, was thinking about the next step in his career. “Every CFO has to catch up with the changes in his industry,” he says. For Nagpal, who qualified as a chartered accountant in his native India, that means going back to school for an MBA degree. “It’s a logical step,” he says, “in positioning yourself to become a CEO.”

So what’s Nagpal to do? There’s no one opinion about the best way to strike the fine balance. Not surprisingly, business schools say an aspiring CFO could use a full-blown MBA and a current one will find value in an executive MBA. “The time spent on an MBA is the most efficient way of gathering a lifetime of learning that you would otherwise have to slowly and painfully acquire,” says Paul Grundy, a professor of finance at Melbourne Business School. An MBA, he says, “would not just give a broad exposure to many disciplines, but also give the future CFO deep exposure to valuation.”

Even Ramu admits that being a CPA alone may not be enough to gain full perspective on the job. “Advising the CEO,” he says, “regarding mergers and acquisitions, investor relations, foreign exchange transactions, and so on may lend itself to better rendering by an MBA rather than a CPA.”

The underlying message is that CFOs need to build skills in both disciplines — and verify them on a CV. A combination of schooling and experience seems the best approach. This gels with Martin Cubbon’s view. “If all you have is accounting training,” says the CFO of Swire Pacific, the aircraft and property group in Hong Kong, “you must accept that in the modern world you must have financial knowledge if you want to be CFO of a decent-sized company.” A chartered accountant in Britain with a degree in econometrics, Cubbon felt strongly enough about the need for broad exposure to persuade his boss at Swire to send him to INSEAD in France for executive courses in international finance and treasury operations, and to Stanford Business School for what he calls a “mini-MBA” that he completed in five weeks.

Unlike Cubbon, many CFOs cannot count on the largesse of their companies’ donation of time and money to bolster their careers. Still, experts agree that a full-time MBA (for junior managers or specialists switching careers) and an executive MBA (for experienced officers) have the edge over attenuated part-time (weekends and evenings) and distance or Internet-based programs. Intensive, face-to-face interaction is still more effective in teaching and learning, and in forging bonds among participants. In general American and Asian business schools have very structured programs, with the first year devoted to compulsory courses covering general management functions and the second to electives. Many European institutions dispense with general courses and expect participants to design their own curriculum from a wide range of subjects, which explains why full-time MBA programs in Europe last ten to 18 months, not two years as in most US schools.

Anyone planning to take an MBA must make sure his study habits mesh with the school’s teaching culture. Many institutions use the case study method as pioneered by Harvard Business School, but some rely on a more theoretical approach. The University of Cambridge’s Judge Institute of Management in the UK, for example, requires a 12,000-word dissertation. Language is also a factor. MBA participants at Italy’s SDA Bocconi must be fluent in both English and Italian.

And of course, there are the expenses. A full-time two-year MBA at a high profile US B-school costs more than US$100,000. Shorter programs in Europe are cheaper at US$70,000. In Asia the Australian Graduate School of Management charges around US$50,000, while fees and living expenses at Manila-based Asian Institute of Management come to US$22,000.

The electives on offer are also important. Business schools that specialize in the finance and accounting function design courses meant to hone particular skills and enhance knowledge, such as a class called “The New CFO” at Mt Eliza Business School in Australia. At Melbourne Business School, which is merging with Mt Eliza, the would-be CFO can choose electives in corporate finance, financial statements and analysis, risk management, mergers and acquisitions, real options resource projects, and corporate governance. Other Asian MBA schools with strong finance and accounting programs include Macquarie Graduate School of Management in Sydney, NUS Business School in Singapore, and Hong Kong University of Science and Technology (HKUST).

Some schools offer dual degrees. Mt Eliza has a tie-up with CPA Australia, the country’s largest accounting institute, on a CPA-MBA qualification, although this program is under review with the ongoing merger with Melbourne Business School. Curtin University has a similar dual degree. The participant, who must have at least two years relevant work experience, first completes six 12-week courses at CPA Australia. He or she then proceeds to a partner business school, which counts the CPA courses as MBA credits. The participant needs to complete only seven to ten more courses (compared with the usual 18 to 22) to earn an MBA. Over at HKUST, MBA students can opt to take additional units in the Master of Science in Financial Analysis program and graduate with both an MBA and an MSc in three years.

What about a chartered accountant who has more than ten years of managerial work experience? “We would strongly encourage him or her to do an executive MBA,” says Ho Yew Kee, MBA academic co-director at NUS Business School. “The regular MBA is more for mid-executives with about four to six years of working experience.” An executive MBA program is typically held on weekends and features residential workshops. The 16-month program at HKUST, a partnership with Kellogg Business School, meets on Friday afternoons and weekends, with a live-in week at the Kellogg’s Illinois campus in the US and another week at HKUST in Hong Kong.

Other high profile executive MBA programs include those offered by the University of Chicago Graduate School of Business in Singapore and by Canada’s Richard Ivey School of Business in Hong Kong.

Which School?

Nagpal, the Avnet CFO considering an executive MBA, says he is looking at schools with “brand equity”. After all, he is not only enhancing his CFO skills, but also positioning himself for a higher post. Like it or not, a school that regularly features in the top ranks of various surveys enjoys top-of-mind recall among selection committees and recruiters. All things being equal, someone with an MBA from Harvard is more likely to make it to a short list than someone from a school with a much lower profile. Never mind that MBA rankings by Business Week, U.S. News & World Report, Financial Times, The Wall Street Journal and other publications often come up with divergent results.

The Graduate Council’s Wilson, who is a CPA, a chartered accountant in Canada, and an MBA who taught at Harvard, says a better gauge of a school’s quality is to see which ones regularly attract corporate recruiters (for a selective list, see “Follow That Recruiter!” at the end of this article). “I can tell you from experience as well as our own research that there are many schools that never appear on any of the rankings that have great reputations in the eyes of recruiters,” he says. “At Ernst & Young (where he was a managing partner), we didn’t go to schools that people thought were great because the students we got there did not perform, did not want to work, did not get promoted.”

And when you have finished your MBA? “An MBA opens up your thinking,” says Sydney-based Paul Rowe, senior client partner at executive search group Korn/Ferry International and head of its CFO Center for Excellence practice. “It helps accountants move from pure finance to line management and broadens their horizons.” Even so, the headhunter stresses that an accounting degree is still a prerequisite for a CFO role. “An MBA would help as well if you have ambitions of being a CEO,” adds Rowe. “But a CFO cannot jump from finance to the top job without proven line and P&L experience. Our clients place a higher degree of reliance on a person’s experience, background, and track record. If he has an MBA, that would be icing on the cake.” In a globalizing and ever more competitive corporate world, however, those three letters could tip the balance in your favor.

Mindee Hansen is a freelance writer based in Hong Kong.

Follow That Recruiter!

One good way of choosing an MBA school is to find out which companies recruit from it. “It’s expensive and time-consuming to interview potential employees, so companies go to only those schools they judge to be very selective in admitting students and have rigorous programs,” says David Wilson, president of the Graduate Management Admission Council in Washington. The council recently asked 692 multinationals and US companies which MBA schools they recruited from. CFO Asia went through the 111 names and compiled a sampling of institutions that are strong in finance:

China Europe International Business School (China)

Columbia Business School (US)

Cornell University — Johnson School (US)

Duke University — Fuqua School of Business (US)

HEC School of Management (France)

INSEAD (France and Singapore)

IMD (Switzerland)

London Business School (UK)

Manchester Business School (UK)

Massachusetts Institute of Technology — Sloan School of Management (US)

McGill University – Faculty of Management (Canada)

National University of Singapore — NUS Business School

New York University — Leonard N. Stern School of Business (US)

Northwestern University — Kellogg Graduate School of Business (US)

Stanford University — Graduate School of Business (US)

University of California at Los Angeles — Anderson School of Management (US)